CAG favours MAT on construction firms

NEW DELHI: The government is set to cast its net wider on the construction sector after the statutory auditor pointed out flaws in the current regime.

Construction businesses incorporated as firms and association of persons, or AOPs, have escaped the minimum alternate tax levied on companies, the Comptroller and Auditor General pointed out in an audit report tabled in Parliament on Tuesday.

The CAG also released reports on the DEPC scheme and service tax on banking and other financial services.

"As MAT is not applicable to firms/AOP, these entities get away by paying nil or minimal tax resulting in huge amounts of revenue being foregone by the government despite these companies making comparable profits from their business," Anupam Kulshreshtha, Director General, CAG said releasing the report .

"We recommend that the purview of section 115JB i.e. MAT may be extended to Firms/AOPs who are taking advantage of deductions or incentives available in the Act," the report noted, saying that a number of entities engaged in the construction sector were registered as firms/AOP.

"The turnover and profits of these entities were comparable to some companies in the construction sector," the audit report noted. The central board of direct taxes has accepted the recommendation.

The CAG also pointed out that the section 80IB(10) incentive to low and middle income housing was being appropriated by high income groups. The CBDT said the section was being phased out.